I have received some amount of money due to death of my relative who had nominated me as beneficiary. I want to ask whether this would be treated as my income and taxable as per Income Tax rules. I also want to know if the amount is invested in bank, whether interest earned would be taxable as income. My son is 19 years old student; if I gift this sum into his saving/FD account, can I save income tax because interest would also be credited in his account and his income being below the taxable income. What are the documentation if I decide to gift this amount to my son.

Suraj Prakash , New Delhi

Money received without any limitation is tax free if received under a will or by way of inheritance; or in contemplation of death of the payer. As per your question, if you have received the sum on account of death of a relative, same will not be taxable as it is out of purview of income as stated in provision u/s 56(2)(vii)

56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources, namely :

…..

…..

(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,

Provided further that this clause shall not apply to any sum of money or any property received

……………..

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor, as the case may be; or

…..

Interest on money kept in Fixed Deposit

Yes, the interest earned on the FD will be taxable in your hand.

Gift to son

Yes, you can gift money to your son the gift can not be his taxable income because you are father and gift from relative is not taxable income as per section 56(2)(vii).

Since your son  is major, clubbing provision u/s 64 shall also not effect you. In other words  , interest on FD in your son  will be chargeable to tax in his hand .However, as you have rightly stated, shall be tax free because your son has income below exemption limit.

How to Give Gift 

• Give the money by account payee cheque to your son.
• Prepare a gift deed wherein clearly state the source of fund , relationship, cheque no , bank name and date.
• Write clearly that you as father is giving gift to your son and once given you will have no  claim on such amount.
• Get this deed signed by Notary Public ( which you can get i any court premise on payment of Rs 100 or more as the case may be )